Is Smartphone Innovation All Tapped Out?

A panel session probing the perennial heads or tails of mobile device commoditization vs mobile device innovation here at MWC 2016 earlier today heard an interesting range of views. Speakers ran the gamut of mobile makers big and small (Samsung, Motorola/Lenovo and Wileyfox), through to chipset maker Qualcomm, alternative open Android flavor Cyanogen, and mobile operator Telefonica.

Each had their own spin on what ‘innovation’ means in the smartphone space now, in the context of mature Western markets — and inevitably aligning with their respective business imperatives. And no one was quite willing to pronounce smartphones too boring to be bought in the sought for quantities to sustain the mobile growth engine. Although there were various takes on what being innovative in smartphone terms means now.

Connected devices extending the capabilities of handsets — and thus acting as an added selling point incentive — are clearly front of mind for some, such as Samsung, which has of course had a tougher time in the hyper competitive smartphone market in recent years.

The idea that both innovation and commoditization are happening simultaneously – with a two-tier smartphone market in play that’s simultaneously delivering increasing value on the one hand, yet still coming up with compelling new bells and whistles at the premium top of the line was also generally accepted.

“On the innovation side when we hear innovation’s gone from the category… we think that’s absolutely wrong,” said Tim McDonough, SVP of marketing at Qualcomm, pointing to flagship announcements this week from Samsung and LG. “Innovation in the handset’s not constrained to the 4.5 inch or 5 inch screen in the device; it’s everything surrounding it, including the ability to capture virtual reality and watch it and share it over wireless with friends and family,” he argued.

Samsung’s Jean-Daniel Ayme, Corporate VP of its IM division, asserted that the “centre of an ecosystem” is now building around the smartphone – talking up the VR angle it was pushing heavily at its flagship launch event yesterday. Its Gear VR headset links to and extends the capabilities of its flagship smartphones so the headset featured prominently in the launch of the Galaxy S7 and S7 Edge (Some might say too prominently… ). So you could argue a flagship phone in and of itself is not longer enough to turn heads and excite upgrades on its own. But throw in compelling enough connected accessories and that changes the game, argued Ayme.

Stephane Maes, VP of product management and planning at Motorola, now owned by Lenovo, said its take on innovation is more about building features into phones that consumers are genuinely asking for –- noting, for instance, that it is selling a phone which boasts of having an unbreakable screen. And talking up “meaningful innovations that matter to consumers”. So kind of the opposite of VR then; i.e. really practical stuff, rather than pure fantasy.

The wild card on the panel, UK smartphone startup Wileyfox, which uses Cyanogen’s flavor of Android on its smartphones, argued it’s delivering innovative by offering consumers an alternative on the two-year carrier contract that locks people into paying a hefty chunk for handset hardware. CEO Nick Muir’s argument is that handset component costs have been commoditized so that when coupled with a lean startup philosophy it’s able to deliver ‘innovation’ in the form of a range of affordable yet acceptable (in terms of performance and design) smartphones to budget-conscious customers.

“People may much too much for their mobile devices,” said Muir. “More and more people are beginning to see the cracks in the standard model – and that standard model being you have to pay for a two year contract to be able to afford the device you want… I know that the bill of materials allows us to be able to sell the device at a reasonable price and the reason we can do that is not enormous scale, it’s not just tier one components, it’s around the fact that we don’t have any sporting contracts, we don’t have legacy pensions, we don’t have glass offices, we all travel by EasyJet and we stay in Airbnb. We are a low cost organization and that low cost gets passed on to the consumer – and that’s part of it.”

For Cyanogen itself, which builds its own software additions into open Android and thus aims to expand the capabilities offered by stock Android (being steered in that mission by asking a core community of developers what new OS features they would like to see), it’s latest software development is focused on reducing friction with app interactions.

“Today we announced a platform on top of Cyanogen, called MOD, and what MOD is essentially the post-app interaction model,” noted Vikram Natarajan, SVP, global partnerships & distribution, referencing its earlier MWC news. “We can take the best of apps and integrate them in the surface areas of the operating system – such as your dialer, such as your calendar, such as your lock screen, so you have much richer interaction models with those services that you know and love, while still potentially going back to the app for a more fully featured interaction.

“MOD we believe is the future of interactions when it comes to these services, and it’s not apps vs MODS, it’s apps and MODs — because MODs extend the app experience. And we think this is interesting because now from a commodity perspective we can partner with handset makers and provide them differentiation over and above regular good old Android.”

Privacy and security rising up the agenda

One interesting theme that emerged from the discussion was that privacy/security is becoming an increasing differentiator for different players in a commoditized smartphone space. In the Android OEM space you could argue that’s a symptom of the platform being steered by Google, a company whose business model is based on amassing huge amounts of data about users in order to power its ad targeting business. (Although Apple’s opposite, very public pro-privacy stance when it comes to iOS may well be encouraging others to follow its lead too.)

So little wonder there has been room for Cyanogen to expand Android by, for example, pushing the development of individual app controls for users (a feature which has now trickled down to Wileyfox’s Android devices, for example).

The lone carrier voice on the panel, Francisco Montalvo, director of the group devices unit for Telefónica S.A, also asserted that privacy will be increasingly important as the Internet of Things proliferates — arguing that consumers will become more aware of the trade offs they are making in exchange for access to more and more connected services.

“I don’t think the smartphone itself will be providing the innovation we are expecting. I truly believe the information gathered by the smartphone will create new use cases for consumers – that’s where the value is. And that’s why for us it’s so important that the consumer are aware of the information that the smartphone is gathering – and how that information is shared with other third parties. That’s why we are supporting Cyanogen. That’s why we believe consumers need to be aware about the value they are getting in exchange of information they are sharing,” he said. “This is where we see – in the next two years – a lot of movement.”

Qualcomm’s McDonough also talked up future developments coming down the pipe related to privacy and security. “We think the next is the phone is your personal identity. We don’t mean your phone just for payments, or your phone just for your health records. But your phone as a representation of you. And when you think about how important that device could be for your, as your digital passport, going from country to country, the need for security and authentication becomes so incredibly important,” he said.

“Qualcomm’s investing a lot in things like machine learning, the ability to run all of the sensors in your smartphone all of the time. And with a device that’s aware of who you are, what your behavior patterns are, it actually continually authenticates that you’re you – without having to put in a pin or a password or a fingerprint. So think about your phone as your personal identity and how important security is and how you can protect that information. I think that’s one area of innovation.”

“The other is really your phone as a thinking entity. So again take the ability to run a neural network on your phone, have that neural network aware of what’s going on around it from all the sensors that are running on it constantly – can your phone become a personal assistant that’s context aware, can make decisions for you… That’s aware of you, your habits and what’s always going on with the data in the phone and the world surround it,” he added.

“Those are just a couple of examples where anyone who’s saying there’s no innovation in the smartphone today is going to be here in a year or two or three is going to be surprised with what the next wave of handsets is going to do.”

On security and privacy, Wileyfox’s Muir described it as one of the differentiating “pillars” for its affordable Android user experience. “We’ve spent a lot of time on that. I don’t think it’s right that apps should be able to harvest your data and give your data away to the highest bidder or use themselves. You should have more control over that,” he noted, listing it first in his list of critical tweaks, ahead of even device personalization and comfort.